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MALAYSIA is in early-stage negotiations with China to establish a rare earths processing facility, sources familiar with the matter have revealed, with the country’s sovereign wealth fund, Khazanah Nasional, expected to partner a Chinese state-owned enterprise for the project.
Reuters reported on Thursday that the proposed joint venture would be a notable policy departure for Beijing, which has long restricted the export of rare earths processing technology in a bid to maintain its dominance over the global supply chain.
According to sources in Malaysia, China is now open to sharing its technology in exchange for access to Malaysia’s undeveloped rare earth reserves, partly to curtail the growing presence of Australian competitor Lynas Rare Earths, which operates a processing facility in Pahang.
Sources told Reuters that discussions remain sensitive, with all four individuals declining to be named.
Khazanah Nasional, along with Malaysia’s ministries of natural resources and international trade, did not immediately comment on the matter. China's State Council Information Office has yet to respond, amid the country’s National Day holiday.
Despite the potential, the project may face hurdles. A Malaysian source cited uncertainties around whether the country could supply sufficient raw material to sustain the facility. Environmental concerns and complex regulatory requirements at both state and federal levels also remain significant obstacles.
Malaysia has previously declared that rare earth mining would not be permitted in ecologically sensitive areas, such as water catchments and permanent forest reserves.
The government has banned the export of raw rare earths to prevent the outflow of unprocessed resources, allowing only one pilot project since 2022 to inform national guidelines for mining and licensing.
Malaysia is estimated to possess around 16.1 million metric tonnes of rare earth deposits, though it currently lacks the advanced capabilities required to mine and refine them.
A potential deal with China would, for the first time, allow Malaysia to host processing technologies from both Chinese and non-Chinese sources, a development Natural Resources Minister Johari Abdul Ghani described as “significant” in remarks made in August.
He confirmed that Beijing was prepared to offer technical assistance, although Chinese President Xi Jinping had requested that collaboration be restricted to state-linked firms to protect proprietary trade knowledge. Johari also stressed that discussions were ongoing and no agreement had yet been concluded.
If realised, the planned refinery would be designed to process both light and heavy rare earth elements, two Malaysian sources said. Heavy rare earths, crucial to the manufacture of clean energy technologies, remain relatively scarce and in high demand, making them strategically important for advanced industries including electric vehicles, mobile devices and defence systems.
As global manufacturers seek to diversify rare earth supply chains in response to Chinese export restrictions earlier this year, the proposed deal could position Malaysia as a key alternative in the region.
Australia’s Lynas has been developing its footprint in Malaysia, having signed an agreement in May with the state of Kelantan to secure future supply of mixed rare earth carbonate and bolster local industry participation.
Meanwhile, Bernama reported on Wednesday that Malaysia continues to invest in domestic rare earths research and sustainability measures.
Speaking at the 11th Mineral Symposium (Simpomin 2025), Datuk Mas Rizal Mohd Hilmi, Deputy Secretary-General of the Natural Resources and Environmental Sustainability Ministry, said efforts were underway to develop eco-friendly technologies for extracting and treating rare earth elements from non-radioactive sources.
The government-backed project, led by the Mineral Research Centre of the Minerals and Geoscience Department (JMG), began in 2024 and is due for completion in 2026.
It focuses on in-situ leaching, solvent-based recovery methods from secondary sources such as mine effluents, and the treatment of REE processing waste.
Mas Rizal underlined the ministry’s commitment to innovation in mineral processing, waste management, and integration of digital systems and artificial intelligence in exploration.
“Continuous investment in research and technical capacity building remains a priority for the ministry,” he said, emphasising the need for skilled professionals with both scientific knowledge and long-term vision to support Malaysia’s growing rare earths sector. - October 2, 2025
